Magyar Ltd. (Magyar) is a large retail clothing store. Recently, the store manager became concerned about the amount theft and she wanted an idea of how much was being stolen so she could decide whether it was worthwhile to install theft-prevention equipment. The accountant told the manager that if she counted the inventory on hand he could give her an idea of the amount of inventory being stolen.

The manager had the inventory counted after store closing one Sunday. According to the count there was $255,000 of inventory on hand. The manager also told the accountant that since the year-end the store had purchased $198,000 of inventory, had sales of $450,000, and returned $27,500 of merchandise suppliers. At the last year-end Magyar had $325,000 of inventory. The gross margin that Magyar usually earns is 52 percent.
Required:

a. Determine the amount of clothing that might have been stolen from the store.

b. Is it possible to conclude with certainty that the amount you calculated in

(a) was due to theft?

c. Why was it necessary to count the inventory to estimate the amount of inventory that was stolen?

d. If Magyar had used a perpetual inventory control system would a count of the inventory have been required to provide the manager with the information she required?